- July 24, 2024
- Posted by: Larry Walsh
- Category: Blogs
This is the second in a blog series on the pillars of ecosystems.
By Larry Walsh
At a recent ISV event, an owner approached me with a question. “Ecosystems require opportunity, trust, and monetization. Of those three, which do you think is the most important?”
I didn’t hesitate with my answer: trust.
Without trust, opportunity and monetization mean nothing. There would be too much risk for an opportunity to materialize into an engagement or result in equitable return on investment. While vendors and channel advocates beat the drum of the value and power of ecosystems, they’re playing a tune well-known to the partner community. An ecosystem is a fancy way of saying collaboration in go-to-market activities — co-marketing, co-selling, collaborative implementations, and coordinated ongoing support to the end customer. Partners have been doing this since time immemorial.
Partners also know through experience the importance of trust in conventional and ecosystem relationships. They’ve been burned many times over the years by vendors violating their deal registrations, sales reps flipping sales to preferred partners, peers disrupting customer relationships, and promises of fantastically profitable opportunities never materializing. Deal registration is supposed to insulate partners from disrupted opportunities. Vendor rules of engagement are intended to establish boundaries to protect business investments and accounts. And yet, despite these “protections,” partners still experience conflict.
Ecosystems bring the issue of trust to a higher level. IT systems have a lot of moving parts. No one company — vendor, integrator, partner, service provider, or professional services firm — has all the offerings, capabilities, and expertise to transform a collection of products into a value-producing system. Ecosystems and IT systems are different sides of the same coin when it comes to making technology work.
Today, though, ecosystems are more opportunistic and transient than persistent and durable. They often come together when one party — the lead on an IT project — seeks recommendations from vendors, distributors, integrators, or others for a company that can fill a particular gap. While these relationships may remain intact, frequently they’re not geared at repeating the latest project or developing new capabilities for future opportunities. In practical terms, the transient nature of ecosystems means partners must repeat the process of developing trust with the parties they engage, which slows down progress toward value creation.
Through dozens of conversations with vendors, Channelnomics has uncovered varying views on ecosystem management. Orchestration (the coordination of different partners in opportunities and engagement) seems like a good idea, yet many vendors shy away from taking this level of responsibility. They recognize the value of ecosystems but believe it’s someone else’s responsibility to pull it all together.
Partners, on the other hand, look to vendors to create that center of trust, despite their negative experiences around channel conflict. They believe that vendors hold a “super position” in the channel, creating rules of engagement that ecosystem participants must heed. Partners also believe that vendors can punish bad behavior by excluding bad actors from future opportunities or withholding support and access to resources. And, conversely, they believe vendors can provide incentives and benefits to those ecosystem actors that exhibit good behavior and trust. In other words, partners perceive that the “carrot-and-stick” approach used by vendors in their conventional channel relationships is equally effective in building and maintaining trust in ecosystems.
But vendors have good reason not to take responsibility for policing behavior in ecosystems: liability. In some cases, setting trust expectations and imposing penalties for infractions could lead to allegations of trade interference. And the cost of enforcing policies goes beyond potential liability. As it is, vendors have a difficult time managing the standards in existing channel programs. Extending that same level of oversight to ecosystems — particularly to actors that aren’t partners — is potentially expensive and, ultimately, fruitless.
On the other hand, vendors can establish standards and best practices for partners to follow, and they can promote partners that exhibit good behavior and are deemed trustworthy. Partners are looking to vendors for guidance on their ecosystem relationships. They want to know what partners (and products) work well together. Highlighting companies with good offerings, solid skills, and ethical practices doesn’t generally present liability issues and goes a long way in helping all ecosystem members.
While vendors should take a more active role in developing and managing ecosystems, the responsibility of trust-building ultimately falls on the partners themselves. Partners must be vigilant, ethical, and proactive in maintaining trustworthy relationships. In the end, trust is the bedrock on which successful ecosystems are built. Vendors and partners must play their parts in nurturing and safeguarding that trust, ensuring that ecosystems remain robust, resilient, and ready to meet the challenges of an ever-evolving technology landscape.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.